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Expected Shortfall (Tail Risk) Calculator

Calculate expected shortfall (CVaR) to measure tail risk and potential losses beyond VaR at a given confidence level.

Expected Shortfall (Tail Risk) Calculator

Calculate expected shortfall (CVaR) to measure tail risk and potential losses beyond VaR at a given confidence level.

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Lowest risk allocation.

Guide

Understanding Expected Shortfall and tail risk measurement

  • Expected Shortfall (ES), also known as Conditional Value at Risk (CVaR), measures the average loss in the worst tail scenarios beyond VaR.
  • ES is more conservative than VaR because it considers the severity of losses in extreme scenarios, not just the threshold.
  • Paste a series of periodic returns (daily, weekly, or monthly). More observations (100+) provide more stable tail estimates.
  • Confidence levels (90%, 95%, 99%) determine the tail threshold. Higher confidence focuses on more extreme scenarios.
  • Use ES alongside VaR for comprehensive tail risk assessment. ES addresses VaR's limitation of not capturing loss severity beyond the threshold.

Frequently Asked Questions

Expected Shortfall, tail risk, and CVaR

What is Expected Shortfall (ES)?

Expected Shortfall, also called Conditional Value at Risk (CVaR), is the average loss in the worst tail scenarios beyond the VaR threshold, providing a more comprehensive tail risk measure.

How does ES differ from VaR?

VaR gives the threshold loss at a confidence level. ES gives the average loss beyond that threshold, capturing loss severity in extreme scenarios that VaR ignores.

Why is ES considered more conservative?

ES is always greater than or equal to VaR because it averages losses in the worst tail, while VaR is just a threshold. ES provides a more complete picture of tail risk.

What confidence level should I use?

Common choices are 95% or 99%. Higher confidence (99%) focuses on more extreme scenarios but requires more data for stable estimates. Choose based on your risk tolerance and regulatory requirements.

How many data points do I need?

More is better. At least 100 observations for 95% confidence, 200+ for 99%. With fewer observations, tail estimates can be unstable and unreliable.

Can ES be negative?

Yes. If returns are positive in tail scenarios, ES can be negative (representing gains). Typically, ES is negative (losses) for most portfolios.

How do I interpret ES in dollar terms?

Multiply ES percentage by portfolio value. For example, ES of -5% on a $100,000 portfolio means average loss of $5,000 in worst tail scenarios.

Is ES sub-additive?

Yes. ES satisfies sub-additivity, meaning portfolio ES is less than or equal to sum of individual asset ES. This makes ES a coherent risk measure, unlike VaR.

How often should I recalculate ES?

Recalculate regularly (daily, weekly, or monthly) depending on your risk monitoring frequency. Update when portfolio composition changes or market conditions shift significantly.

What are limitations of ES?

ES relies on historical data and assumes future tail behavior mirrors the past. It doesn't predict black swan events. Use alongside stress testing and scenario analysis for comprehensive risk management.

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Expected Shortfall (Tail Risk) Calculator

Calculate expected shortfall (CVaR) to measure tail risk and potential losses beyond VaR at a given confidence level.

How to use Expected Shortfall (Tail Risk) Calculator

Step-by-step guide to using the Expected Shortfall (Tail Risk) Calculator:

  1. Enter your values. Input the required values in the calculator form
  2. Calculate. The calculator will automatically compute and display your results
  3. Review results. Review the calculated results and any additional information provided

Frequently asked questions

How do I use the Expected Shortfall (Tail Risk) Calculator?

Simply enter your values in the input fields and the calculator will automatically compute the results. The Expected Shortfall (Tail Risk) Calculator is designed to be user-friendly and provide instant calculations.

Is the Expected Shortfall (Tail Risk) Calculator free to use?

Yes, the Expected Shortfall (Tail Risk) Calculator is completely free to use. No registration or payment is required.

Can I use this calculator on mobile devices?

Yes, the Expected Shortfall (Tail Risk) Calculator is fully responsive and works perfectly on mobile phones, tablets, and desktop computers.

Are the results from Expected Shortfall (Tail Risk) Calculator accurate?

Yes, our calculators use standard formulas and are regularly tested for accuracy. However, results should be used for informational purposes and not as a substitute for professional advice.